February 2025 Public Chain Industry Research Report: Challenges and Innovations in Market Pullback

In February 2025, the blockchain market experienced a significant adjustment, posing challenges to both mature networks and emerging public chains. Bitcoin performed relatively steadily, further strengthening its dominance, while the majority of chains, including Solana, Avalanche, and Ethereum, saw substantial declines. Nevertheless, development activities in the public chain sector did not come to a halt: the launch of the Berachain mainnet, the upgrade of Base infrastructure, and the release of Uniswap's Layer 2 became highlights of the month.

Market Overview

The market saw a significant pullback in February: Bitcoin dropped from $98,768 to $84,177, a decrease of 14.8%, while Ethereum fell even more, from $3,065 to $2,216, a decline of 27.7%. In the last week of the month, as security concerns spread, selling pressure intensified.

This pullback closely follows the bull market in January, but the market signals are complex, with investors oscillating between optimism and concerns triggered by security vulnerabilities. Market sentiment has deteriorated, and risk appetite has declined, especially in more speculative areas. Globally, the North American market shows cautious optimism due to policy changes, while the Asia-Pacific market has felt the impact of hacker attacks more acutely.

Regulatory and Policy Changes

The Trump administration's executive order on cryptocurrency focuses on self-custody and the development of stablecoins, providing rare policy clarity for the industry. However, the hacking incident at a trading platform on February 21, which resulted in a loss of $1.5 billion, set a new record for the largest loss in cryptocurrency history, raising new security concerns and quickly changing market sentiment. Meanwhile, the SEC's stance has softened, pausing investigations into several well-known companies and dropping its appeal on the "dealer rules." The bipartisan GENIUS Act (the American Stablecoin Innovation and Establishment Act) further strengthens the regulatory framework for stablecoins, indicating a friendly trend in the U.S. regulatory environment.

Investor behavior reflects this turbulence. The surge driven by the tokens related to Argentine President Milei quickly cooled due to negative news, leading to a sharp decline in valuation and a significant decrease in trading volume. This shift suggests that the market is retreating from high-risk assets.

Layer 1

Layer 1 public chains are generally under pressure, with a total market capitalization decline of 20.8% to $2.3 trillion. Bitcoin's dominance has risen from 71.3% to 74.2%, while Ethereum's share has shrunk from 14.0% to 11.9%. BNB Chain's share has slightly increased to 3.7%, but Solana's share has dropped from 4.0% to 3.3% after a price plunge of 36.3%.

Litecoin rose against the trend, increasing by 1.0% to $128.7, while Solana (-36.3%), Avalanche (-35.7%), and others lagged behind.

DeFi TVL fell by 20.0% to $82.9 billion, with Ethereum at $44.9 billion (a decrease of 21.7%) and Solana at $8.6 billion (a decrease of 34.1%).

Berachain has emerged rapidly, jumping to sixth place after the mainnet launch on February 6, with a TVL of $3.2 billion. The chain issued 80 million BERA tokens and adopted a "liquidity proof" model—an innovative staking method that converts liquidity into network security. Following a $100 million financing in 2024, this month's airdrop and governance incentives have sparked market enthusiasm. Unlike traditional proof-of-stake, this approach may redefine how public chains balance growth and stability, making Berachain a project worth watching.

The speculative token craze for Solana has clearly cooled down. High-profile failures, such as the token associated with Argentine President Milei, have damaged market confidence, leading to a significant decline in trading volume on multiple DEX platforms. Although such tokens will not disappear and can be viewed as digital collectible cards, their peak frenzy may have passed, and traders are beginning to focus more on fundamentals rather than speculation.

Bitcoin Layer 2 and Sidechains

The TVL of Bitcoin L2 and sidechains has decreased by 24.5% from $2.7 billion to $2.1 billion. Core leads with a TVL of $460 million (a decrease of 42.0%), followed by Bitlayer ($350 million) and BSquared ($320 million). BOB performed well, only dropping by 7.9% to $220 million.

In medium-sized platforms, Merlin performed well, with TVL slightly decreasing by 9.3% to $150 million. Small platforms are under greater pressure, with SatoshiVM down 31.5%, MAP Protocol down 29.6%, and Interlay down 27.4%.

The downturn in this field aligns with the views of Stacks co-founder Muneeb Ali at Consensus 2025: "As early enthusiasm wanes, more than two-thirds of existing Bitcoin Layer 2 projects will disappear within three years." He predicts that the market will face severe challenges, and the downturn in February suggests that consolidation may have already begun. Looking ahead, platforms that can demonstrate real utility may be more resilient than projects that rely solely on momentum.

Ethereum Layer 2

Ethereum L2 TVL decreased by 23.4% to $14 billion. Arbitrum maintains its leading position with a TVL of $4.5 billion (down 33.4%), while Base climbs to second place with a TVL of $4.2 billion (down 10.6%), pushing Optimism ($2.1 billion) to third. Polygon zkEVM surged by 104.1% to $300 million, becoming a rare highlight this month.

Base has launched Flashblocks (faster transaction confirmations), Appchains (customized L3), and smart wallet sub-accounts, aimed at maintaining user engagement. Unichain's mainnet was launched on February 16, having previously processed 95 million transactions on its testnet, positioning itself as a game changer for scalability performance, with several heavyweight institutions having joined. Starknet's Nums application chain, as a Layer 3 gaming innovation, showcases the future of modular design.

At the same time, although Sonic EVM is not an Ethereum Layer 2, its Mobius mainnet launch on February 27 as the first SVM chain expansion of Solana attracted a lot of attention, achieving 10,000 TPS and bringing in $47.6 million in funding for a certain DeFi platform within a few days. These actions indicate that Layer 2 projects are investing more heavily in technology rather than just hype.

Vitalik Buterin commented on February 19, emphasizing that Ethereum needs to clarify its positioning in the face of increasing competition. He advocates for Layer 2 to take the lead in scalability (such as a 17x transaction boost) and interoperability, noting that they have evolved from "advanced multi-signatures" into a powerful network. Although he did not directly comment on Sonic EVM, its EVM compatibility and speed resonate with his vision of a "seamless connection" within the "Ethereum universe." However, he also expressed dissatisfaction with the casino-like tendencies in the ecosystem, calling for a focus on real value rather than speculative bubbles.

Financing Situation

Financing activities have slowed down, with a total of 6 transactions completed in February, amounting to 32.4 million USD. Mango Network raised 13.5 million USD for its EVM-MoveVM hybrid chain, planning to launch in Q1 2025. Fluent Labs secured 8 million USD in funding to develop a multi-VM Layer 2 connecting Ethereum and Solana.

The content of this article is for industry research and communication purposes only and does not constitute any investment advice. The market has risks, and investments should be made with caution.